Empty nesters have the ability to save significantly once their children are grown and leave the home.
However, a Nov. 2010 study by the Center for Retirement Research at Boston College revealed that once children become independent, parents decide to “give themselves a break” from saving and spend about $2,000 more a year per person on average than when the kids are at home.
With retirement on the horizon, this can turn into a costly mistake. We’ve put together some simple tactics that can help you turn your empty nest into a nest egg.
- Consider downsizing – When your kids leave the house you’ll probably find that you have much more room than you actually need. Maintaining and cleaning a large home can also become more difficult as you age. It can be a smart financial move to downsize your home. If you sell the house and use the profit to buy a smaller and less expensive home, you can use the leftover money to bolster your retirement or help pay down debt.
- Save on insurance – If your children go to college without a car, your auto insurer is likely to give you a substantial discount or re-rate your policy to acknowledge that your highest-risk driver won’t be using the vehicle for most of the year. Also, you may want to check into your homeowner’s policy. If your child elects to live on campus, your homeowner’s insurance will often cover their belongings.
- Don’t break your savings habit – Chances are you’ve been saving for your child’s college education since they were born. When your child graduates there’s no reason to stop saving. Take the amount you were saving and move it into a 401(k) or IRA instead.
- Be cautious when it comes to credit – Once you are retired it can put a huge strain on your finances if you have to use your fixed income to pay off loans or credit card loans. Strive to become a debt-free retiree. A good rule to live by is: If you can’t pay it off, you shouldn’t charge it. That way you can avoid going into debt and continue to save for your retirement years.
- Profit from small savings opportunities – Analyze your monthly expenditures and find ways to save … even if it’s just a little bit. After all, small savings can add up quickly. If you’re carrying an extra phone line, consider removing the service. Cut down your grocery costs by learning how to cook for two people again. Re-evaluate your Internet, cable and phone provider – there may be savings if you switch to a different service. Take control of your utility bills – if you’re not using all the rooms in your house, there’s no reason to pay to heat them.
As you find more ways to profit from your empty nest, don’t be tempted to spend all your savings. Earmark the extra funds and allocate them towards your retirement. It will make a significant difference!The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate to you, consult your financial advisor prior to investing. Securities and Insurance products offered through LPL Financial and its affiliates member FINRA/SIPC. MidWestOne Bank is not a registered broker/dealer and is not affiliated with LPL Financial.
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